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X5 Retail Group looks closer to cash & carry segment
Russian largest retail trade company X5 Retail Group may possibly master a new format. Lev Khasis, the Chief Executive Director of the company said yesterday that the company is studying cash&carry format now. If X5 starts developing small wholesale trade shops, the company's assets will represent all existing retail formats: discounter, supermarket, hypermarket and cash & carry.
Х5 Retail Group was created in May 2006 due to the merged chains "Pyaterochka" and "Perekrestok". According to the results of first half 2007 the group included 539 own "Pyatorochka" and 170 "Perekrestok" stores. 591 "Pyaterochka" and 10 "Perekrestok" stores worked on franchising terms. X5 got the net income worth to $3.55 billion in 2006; net profit constituted $ 103 million.
Lev Khasis, the Chief Executive Director of X5 said to "RBK daily" that the company is studying the market and opportunities provided by cash & carry format; however, they have not made any decisions yet. "We may possibly open a pilot store to test the efficiency of such format", he added. In his earlier interview to "RBK daily" Mr. Khasis pointed out that "multi-format has an advantage over mono-format in the conditions of the growing market".
The analysts and market players inform that X5 will be present in all retail segments if cash&carry store opens. However, they disagreed in the opinions regarding the perspectives of small wholesale trade segment. "Such format does not actually exists in Russia now. We have only one player of this kind, Metro Сash & Сarry company. This format just does not have target audience", Dmitriy Potapenko, the owner of the grocery shop chains "Gastronomichik" and "Millenium", is sure. Igor Nikolayev, the Director on Development of "Victoria" chain (one cash&carry store in Kaliningrad), agrees: "Theoretically this format is targeted on small and medium business, product selling stands, for example. But retail trade actively forces these players out of market. It seems that only HoReCa segment is the target audience."
Nevertheless, the experience of Metro chain with more than 30 shops in various regions of Russia proves that the demand for small wholesale shipments exists. "The target audience is not just small and medium business, but also various offices and organizations which purchase products and stationary for the employees ", Natalia Zagvozdina, the Analyst of "Renaissance Capital" explains. From her point of view, there is a place on market for many chains working in cash & carry format.
To the opinion of Igor Nikolayev, cash & carry may become a peculiar safety net for Х5 developing its hypermarket chain. Yesterday Lev Khasis announced that the company would open three-four hypermarkets under the draft name "Frank" in 2008; the first of them will be launched in Moscow. Mr. Nikolayev thinks that the company may open cash&carry stores in those regions where the possibility to open a hypermarket exists, but there is no confidence in the sufficient turnover. "The standard hypermarket of 10,000 square meters will require $10-15 mln. of investments; cash&carry store of the same square will cost the company 30% as cheap due to the less sophisticated equipment and decoration", he explained.